What is a Grace Period?

What is a Grace Period?

A credit card’s grace period is the period of time between the end of each billing cycle and when the bill itself becomes due. In some cases, it may be possible to avoid paying interest if you pay off your purchase in full during this period, before the due date.

Individuals who do not carry a revolving or running balance, that is a balance that stays on their card from one month to another, may find that this period is especially useful as it allows them to avoid paying interest on purchases. If you are planning to make a large purchase, like buying an appliance, it may make sense to educate yourself carefully about your credit card’s grace period. If you’re able to pay off your card before you make the large purchase, and then use the card for it, you can avoid paying interest.

However, if you typically carry a balance on your card from month to month, then the idea of a grace period becomes basically meaningless to you. The credit card companies only allow you to avoid paying interest if there is not a balance on your card, so if you don’t have the resources to pay off a large balance, the idea of a special period to do so doesn’t really help you.

If you’re interested in learning more about the grace period on your specific credit card, you should be able to find the information in your credit card agreement. Legally, your credit card company must deliver your bill to you at least 21 days before it is due, so that you have time to receive the bill, adjust your finances accordingly, and return a payment to the credit card company in plenty of time to avoid being additional fees on a balance that you never had the chance to pay off. In fact, this is the reason that this law was created.

In short, a grace period is a period of time that allows you to pay off a balance without it accruing interest. If you typically carry a balance on your credit card it won’t matter to you, but if you don’t, you’ll be certain to appreciate the benefits it offers.